Archive for August 2009

« Local in Ann Arbor home page

How the Secret Plan Would Work

August 21, 2009

The previous post described a proposal for a conference center that circulated within the Ann Arbor city government last spring.  It looks to be on a success track for matching the requirements of the recent RFP issued by the city.

Here are a few more details.  The plan calls for a hotel with 150-200 rooms, plus 15-20 “high-level condo/suites”.  These would be in a tall thin tower with a narrow rectangular cross-section to the north of the property.  The conceptual sketch by Enrique Norton of TEN Arquitectos (most of his previous work has been in Mexico) shows a shimmering white slab that seems to float above the rest.  Though there are no detailed plans presented, it appears that it might be just two rooms thick, with an interior hallway – or even thinner.

At ground level, the plan calls for 20,000 sq. ft. of land area “above the underground parking to be developed by the DDA (to) be sold or ground leased to the developer of the private component.”  This would hold 15,000 sq.ft. of restaurant and retail, and 30,000 sq.ft. of office.  All of this makes up what is described as the “private component” of the plan.  As the proposal notes,

“It is essential though that the parking be designed and constructed to specifically accomodate the project to be developed above it both to (i) minimize the level of structural support costs to be borne by DDA as well as to enable significant time savings in the development of both the parking and the overall complex; (ii) increase the sale/lease value of the improved site by more precisely offsetting support and foundation costs that would otherwise be borne by the private component.”

The actual conference center would be what is called the “Public Component”.    It would be developed in the “air rights” starting at 50 feet above ground and apparently would sit above the ground-level holdings of the private component.  It would presumably be made up mostly of meeting rooms and perhaps the ballroom with seating for 1000 people.  The plan called for this piece to extend over Library Lane and connect with the new Library (which has now been put on hold indefinitely by the ADL Board); if that plan had gone through, the meeting rooms would have been supplemented by the Library’s planned auditorium and additional meeting spaces.  The roof of the conference center is an open green space with gardens, to be made available to the public for outdoor events.

So how does this proposal match up with the RFP?  The actual specifications of the RFP are very brief.  Let’s look at them one by one.

1. Beneficial use of the site. Any proposal for this site must demonstrate a clear benefit to the community and be consistent with the recommendations of the Downtown Plan, and A2D2 initiative. Preference will be given to proposals that incorporate a use (or uses) that provides a publicly available service to the community, for instance, building or open space that may be used for public meetings, recreation, or civic/ cultural events.

Clearly this proposal meets those requirements.  The Downtown Plan now contains specific language calling for a conference center.  The proposal has a public plaza and the roof garden, and the ballroom would be a valuable asset in holding public meetings as well.

2. Environmental benefits. The development proposal should incorporate to the greatest extent possible environmentally sensitive design and energy efficiency features that follow Leadership in Energy and Environmental Design (LEED) standards. In addition,the project should propose innovative and environmentally friendly runoff water management and seek to improve water quality.

The proposal as sketched out does not refer to these features, but it is merely a matter of engineering and I am sure that a more fully fleshed out version could easily satisfy these requirements.

3. Financial return. The proposal must provide a positive financial return to the City. In the absence of other considerations, the City has a fiduciary responsibility to obtain fair market value upon the sale of City assets. Long-term lease or other property arrangements will be considered, but must meet this financial return criterion.

(You will note that no particular level of financial return is called for.)   The proposers say that the city will benefit from direct and indirect tax revenues, and from an increased “level of business activity”.  This is basically saying that the presence of the conference center itself is a benefit (in that it would bring more people downtown). Indirect tax revenues are not possible unless the meaning is that downtown property values would rise.  In Michigan, cities don’t receive sales tax and cannot impose special taxes on events, etc.  There is a hotel tax, but it goes exclusively to the Convention and Visitors Bureau (CVB) to promote Ann Arbor and its surrounding communities.

But any hope of direct tax revenues or a payment for the sale or lease of the city land vanishes into the financing plan for the conference center.  As the proposers astutely note, it is not possible to build a large enough hotel at that location to pay for the costs of building and managing the conference center.   They estimate that such a self-supporting model would require a hotel of 600-1000 rooms, and the Ann Arbor market will simply not support that.  “Ann Arbor is not the kind of natural “resort” area (like Las Vegas or Miami Beach) that could support this level of hotel investment through general tourist or business traffic to supplement the conference related business.”  So the natural solution is…public support!

The conference center would be owned by a not-for-profit 501(C)(3) organization, with a board composed of “those institutions or public sector entities that would be most involved in or benefited by the center”.  This NFP would then contract with the developer to develop, manage, market and book the conference center (the last two possibly in conjunction with the Ann Arbor CVB).

“The development and reserve for operations of the Conference Center will be financed with triple tax exempt bonds.  These bonds would be sold on a TIF basis, with certain annual revenue streams identified and secured by a trustee for payment of the bonds….the NFP will be the borrower on a non-recourse basis and… an appropriate public or quasi-public entity such as the DDA will be the issuer.”  (Note that any direct payment of property taxes to either the city or the DDA just vanished.)

The NFP would amass sufficient equity to build the conference center with an equity payment from the private developer of $1.5 million (thus feeding any financial return to the city back into the project itself), plus $6.5 million in bonds.  The revenue stream identified to pay the bonds would be as follows: $500,00o per year in real estate taxes; room revenues, $200,000; high-end suites revenue $100,000.  But not to worry: it will rely on “issuance of DDA bonds which are backed by the City and are therefore equivalent to full faith and credit city bonds.”

(Note that this sum seems low for construction of such a large facility.  Of course site preparation, utility upgrades, and the parking structure are already paid for through bonds issued for the parking structure. Also, it may not include the cost of developing the retail and office ground-level “private component”)

I have no doubt that if the Valiant Partners do submit a proposal in response to the RFP, it will be expanded, refined, and polished.  Still, this seems to give a preliminary snapshot of what has been in the works for months.   Will the Council once again encumber the residents of Ann Arbor with another project that benefits only a narrow sector of the city?  The mechanism seems to be running smoothly.


Categories: Business, civic finance

Comments: 2 Comments

The Secret Plan for the Conference Center

August 20, 2009

The Ann Arbor downtown conference center has been the focus of a very well-oiled machine that has been functioning for well over a year, and most Ann Arbor residents haven’t even heard the sound of gears.  Now we can offer a peek behind the curtain, thanks to an opportunity to look at the secret plan (made possible by an anonymous source).

As we reported earlier, the city of Ann Arbor has sold bonds slightly in excess of $49 million to fund an underground parking garage beneath the Library Lot.  That project began with a DDA resolution in September 2008 and passage by council of the bond resolution in February 2009.  That bond transaction is now complete, despite the lawsuit filed by the Great Lakes Environmental Law Center.

But while there has been some public discussion about the underground parking, little has been said about what will happen on the surface above it.  Roger Fraser provided a hint in his presentation to the Council during its retreat in January 2009; as we reported earlier, he said that “a group of folks…have made some conceptual plans” “at their own risk” to place a small conference center on top of the current Library Lot, using a “partnership” with the city, the DDA, and the private sector.  But that proposal has been held in secret by the City, and a FOIA request by local attorney Karen Sidney was denied.  Talks were, however, already going on, and CM Sandi Smith, also a longtime DDA member,  called a meeting of councilmembers as early as January to discuss plans for the top of the structure; Smith then introduced a resolution calling for an RFP that has now been released. Meanwhile, with little fanfare, the City of Ann Arbor’s Downtown Plan as amended suddenly has a section that calls for a conference center downtown.

The question of course, is: will this RFP truly be an opportunity for many competing ideas for the best use for the top of the underground parking structure?  Or it is merely a vehicle for a “done deal” to put into place the secret proposal mentioned in January?  My conclusion: it is “wired”.  Not only were the time frames very short for another proposer to come up with a fully fleshed proposal, but this one has a great deal of firepower behind it.

The proposal states that its vision is “To aid Ann Arbor in becoming ‘the’ conference destination, particularly for a knowledge-based niche market intelligence.”  The team, called Valiant Partners LLC, includes two people with strong connections to the University of Michigan: Fritz Seyferth and New York resident Bruce Zenkel, a major donor to the Ross School of Business and UM Athletics. Michael Bailkin, a dealmaker from New York who has specialized in real estate tax breaks and Keith D. Coe, the CEO of VF Hotels, are the other impressive team members.

The proposal calls for a very tall, thin hotel on the north side of the lot, over a low flat building that comes up to the streetside but allows for a public plaza behind it.  At street level would be retail shops and office, with a conference center above them.  The roof of the conference center would be a summer/winter garden (open to the public for outdoor events) with yes! a skating rink for winter.  It would include a 8,000 square feet ballroom where 1000 people could sit for dinner.

It is evident in reading the proposal that the very general requirements of the RFP will fit it perfectly.  I’ll review some of those congruences and the interesting financial aspects of the proposal in a later post.

UPDATE: In a comment on the Ann Arbor Chronicle, the editor, Dave Askins, pointed out that changes to the downtown plan to include a conference center were mentioned in a story he wrote last November. It was a mention at the end of the story without any location designated.   The implementation of the plan is not yet complete and Council has postponed final consideration; the version on the website was adopted by the Planning Commission on May 19, 2009.

SECOND UPDATE: See also Ed Vielmetti’ s comment below regarding early discussions of a conference center in fall 2008.  It is clear that this part of the “machinery” has been in place for some time and my description of its appearing in the A2D2 plans “suddenly” was a solipsistic response on my part.

THIRD UPDATE: AnnArbor.com, in their August 24 story on this project, interviewed one of the principals (Fritz Seyferth) and confirmed that a proposal is in preparation for submittal to the city in response to the RFP.  “Representatives for a group of private investors from New York confirmed today they’ll be submitting a proposal for a hotel and conference center project, potentially costing $30 million to $50 million to build, and involving a public-private partnership. Details of the potential partnership have not been disclosed.”  In the story, Seyferth is quoted as saying that he hopes the project will enhance the city as a center for high-concept, high technology discussions.  Again quoting from AnnArbor.com, “We pride ourselves in the Midwest as being a hub of remarkable intelligence in Ann Arbor…We’re trying to say, ‘Why don’t we create a center here where we attract those people?’”

Concentrate, in their follow-up, also attempted to interview Seyferth but were only able to obtain a general comment by email.  The Concentrate article indicated that the group of developers had leaked details about the project; however, there seemed to be no fresh material beyond what we have already posted.

FOURTH UPDATE: AnnArbor.com business reporters interviewed a number of developers in the Ann Arbor area and found them to be skeptical.

FIFTH UPDATE: For additional reports on this story, visit the Library Lot Conference Center page, where all related articles are linked.

Categories: Business, civic finance

Comments: 9 Comments

Digging Ourselves Into a Hole

August 15, 2009

This very long and detailed post describes the cloud of factors and actions that link our city’s future finances with the decision to bond for the South Fifth Avenue Underground Parking Structure, and also ties in the possible conference center planned for its surface.  I’ve attempted to aggregate useful documents and links in addition to putting forth a point of view.

Things are looking grim for government in the City of Ann Arbor.  In his presentation to the Council on August 6, 2009, Tom Crawford, the city’s Chief Financial Officer, explained that the city is expected to suffer a severe loss in revenue over the next couple of years.  While the adopted budget for Fiscal Year 2009 (which began in July 2008) calls for $89 million in both revenue and expenditures, Crawford forecasts that by FY 2011 (begins in less than a year from now), the city’s revenue will be only $83 million.  Even with proposed cuts proposed to various programs, the city’s expenditures will be greater than its revenues.  As Crawford said, this means “significant” cuts in services.  The city administration has a suggestion: institute a city income tax.  In an interview  at a working session on August 13 (broadcast over WEMU), City Administrator Roger Fraser said that the city “owes it to the community to decide if they want a continued reduction in services or a new tax”.  But Council is apparently stepping back from the brink for the moment, as they did not appear favorable to putting an income tax measure on next Monday’s agenda; according to the Ann Arbor Chronicle, that means the tax will not be on the November ballot.

Unfortunately, the community also did not get to decide whether to drain the city’s fund balance to build a new city hall.  That was last year’s debate, however, and one we’ll revisit some other day.  But there is another of what Crawford referred to as investments in capital and special projects “for the city’s future” on the table: the underground parking garage at South Fifth Avenue, under what we have always liked to call the Library Lot.  The bonds have been sold and are due to be finalized on Wednesday (August 19). Beginning in 2013, the city must pay out $3 million per year to service these bonds, going up to $3.5 million by 2035 (its last year). That’s about 4% of the total current city budget. Will there be a last-minute save or will we continue with this $55 million project in the face of our collapsing city finances?

Recent decisions affecting the fate of the Library Lot

It began with the Ann Arbor District Library. Beginning in 2006, the AADL board had engaged in a long planning process, including a lot of public participation, to renovate and expand its aging downtown library.  But in November 2008, the board voted to suspend those plans.  The board had hoped to put a millage on the ballot to pay for the expansion, and then withdrew that idea in acknowledgment of the worsening economy.  In April 2009, the board moved further to reduce the millage rate being charged – which also meant that no more money went into its capital improvement account.  It appears that the construction plans will stay on that shelf for the foreseeable future.

Unfortunately, the city has not proved to be that nimble. It has continued on its trajectory for the parking garage that was originally initiated in conjunction with the Library’s plans.  In September 2007, the Downtown Development Authority Board voted to support the Ann Arbor District Library in its expansion plans. After the Council requested assistance in planning for an underground structure in November 2007, the DDA hired some of the same players as those on the design team for the AADL, and in September 2008 approved a plan to build and fund an underground parking garage.

Happy supporters: DDA members Leah Gunn and Roger Hewitt with CM Margie Teall and Leigh Greden (photo Ann Arbor Chronicle)

Happy supporters: DDA members Leah Gunn and Roger Hewitt with CM Margie Teall and Leigh Greden (photo Ann Arbor Chronicle)

You’d have thought that the library’s change in plans would have given the Council pause, since much of the design of the underground structure was integrated with the library and derived from the library’s plans.  And indeed, we now know from the infamous council emails that there was some discussion of postponing the vote. But in February 2009, Council voted to approve the issuance of  bonds for the South Fifth Avenue Underground Parking Structure. As reported by the Ann Arbor Chronicle, councilmembers spoke to their reasons for supporting the structure, even as several members of the public (including Steve Bean, the chair of the Environmental Commission) spoke against it.  But in the end, only CM Mike Anglin cast a lonely vote against it.  (CM Carsten Hohnke successfully offered an amendment that deleted the portion of the garage extending beneath 5th Avenue from the proposal.)

Free for You and Me?

One of the justifications for going ahead with the construction at this time is often repeated by the Mayor – that parking fees are supposed to pay for it. As the background to the resolution states,

“The cost of construction is being funded 15% by Downtown Development Authority reserves and 85% by bond proceeds. Debt service on the Bonds is expected to be paid from revenues of the City’s public parking system and tax increment revenues collected by the Downtown Development Authority. “

CFO Crawford reinforced this view in an email that was posted on a listserv:

“Although the City’s General Fund guarantees the parking deck debt which was issued, there are no contributions from the General Fund expected for this project.  Since the DDA is a separate legal entity and has the primary responsibility for managing the downtown parking system, it is committing its resources to repay the debt.  The DDA operates with a rolling ten year financial plan which incorporates meeting this commitment.  While the new deck itself may lose money for a number of years (emphasis added) the existing decks can contribute to covering the debt expense. The DDA can rely on the parking system as a whole for payment, reduce the size of the waiting list for monthly parking permits, market to the University (which the DDA hasn’t traditionally done), and tap other DDA financial resources.  All of these avenues are available so the City’s guarantee is not requested.”

But there are two problems with this nifty plan. 

First, the City really is on the hook. The bond description has some very explicit language (see p. 5):

“The City has pledged its limited tax full faith and credit as additional security for payment of principal of and interest on the bonds as a first budget obligation from its general funds, including the collection of any ad valorem taxes which the City is authorized to levy, but any such levy shall be subject to applicable constitutional, charter and statutory tax rate limitations.”

Translation: to pay the bondholders, the City must put these payments as a top priority (ahead of other budget priorities), even if it means levying more taxes, as long as it can legally levy those taxes.

Second: There are some very broad assumptions made in asserting that the DDA will actually be able to make these payments through 2035, especially based on parking revenue alone.

1. The parking system has enough profitability to assume this additional expense. 

According to the DDA’s 2010-2011 budget (recall that FY 2010 began in July 2009),the parking system generated $11 million of income after expenses – but once capital costs are subtracted, the balance is only about $2.3 million.  Take out the $2 million contingency amount, and the budgeted parking fund balance for the year (correcting for rounding errors) is only $194,757.  I assume that the bond payment for the 5th Avenue structure is already factored in, but for 2010 that is only $1.25 million and it will rise to $3.5 million in a few years.

2. The City will not continue to draw on the DDA for supplements to the General Fund.

The City has been drawing down the parking fund at the rate of $2 million a year for the last 5 years and negotiations appear somewhat stalled over whether these payments will continue.  But that amount became a regular and expected supplement to the General Fund budget that is now shown as a question mark on the August 6 budget presentation.  The DDA was also tapped to help pay for the new city hall.  I assume that amount is included in the $2,293,605 budgeted for fund transfers.  With these transfers, the DDA all-funds budget for the coming year is at a $3 million deficit and worse, shows a declining balance, beginning the year with $12 million and ending with about $8.5 million.

3. Parking rates can go up indefinitely as needed.

If the current system is not profitable enough, perhaps parking rate increases could shoulder the additional burden. The DDA passed a schedule of parking rate increases in their November 2008 meeting:

ParkingRates

They have also been moving toward a demand-based parking meter system, in which more desirable areas could presumably cost a premium for parkers.  But parking behavior is thought to be elastic; the DDA makes that assumption in setting different rates in order to influence parking demand.  How many rate increases will the system bear? And even with these already-passed rate increases, how long before downtown merchants are affected by loss of customers because of the cost of parking?  As I explained in an article some years ago, there is a strong link between ease of parking and retail traffic flow.

4. As mentioned by CFO Crawford in the quote above, the DDA could also draw on its TIF (tax-increment) funds.  These are property taxes captured from new construction and improvements within the DDA district; not only city taxes, but the county, library, community college and so on – and even special millages like Solid Waste and the Greenbelt.  Traditionally the DDA has kept TIF funds separate from the parking fund and used them for projects to improve the downtown, and for certain grants.

The DDA’s projected increases in TIF revenues have been hit by two factors: the drop in property values due to the economic crisis and the delay or cancellation of many anticipated projects that would have produced new tax revenue.  (Projects do not pay TIF until they have received a certificate of occupancy.)  The most recent budget showed a deficit of $761,124 for the year when expenses were subtracted from TIF income.

While it is true that schedules projecting the ability of the DDA to make the bond payments have been drawn up and incorporated into reports that supported this project, they appear to have used the best-case, if-only-everything-goes-as-expected scenario that has tripped up many institutions in our country in the last two years.  If we have learned anything from the national, state, county and city budget problems, it should be the value of expecting the unexpected, of planning for complexity, not predictability.

Conclusion: it is reasonable, or even necessary, to expect that the DDA will not be able to make the bond payments indefinitely; unless economic conditions change rapidly, they may fall short in the near future or be unable to meet their other commitments.

Further, if the parking system does generate additional revenue, the city may need it to keep the General Fund solvent.  This is not a time to assign a reliable stream of revenue so that it cannot be redirected.

Parking , development, and the conference center connection

While the immediate impetus for planning the 5th Avenue underground parking structure may have been the AADL expansion plans, other motivations soon surfaced.  There were many supporters at the February meeting, including people who wanted more parking for downtown customers (Leigh Greden is quoted by the Chronicle as saying “If you vote against this garage, you’re voting against our locally, independently-owned businesses”).  Some people liked the idea of underground parking and hoped it might lead to fewer above-ground structures.  Former CM Joan Lowenstein said downtown residents needed more parking.  Others, like Newcombe Clark (now on the DDA board but also representing several business associations) spoke of the need for employee parking so that businesses will locate downtown.  But perhaps the most potent motivation was voiced earlier by DDA Director Susan Pollay in a 2008 memo to Council: the parking is needed to support development in the midtown area.

As reported here earlier, parking has been used as a form of business subsidy.  Even just the ability to reserve spaces, as McKinley has done in Liberty Square via a long-term agreement with the city, is a potent business asset.  According to calculations I did some years ago, monthly permits do not pay the full cost of providing spaces in new structures, and underground spaces are even more expensive.  Pollay’s report specifically calls out the McKinley Liberty Street development as deserving of support: “Additional nearby parking would support this private development investment by making it possible to attract top quality tenants.” The report also mentions the value of the old Y site for potential development and concludes by recommending support columns adequate to support a 25 story building.

The temperature surely rose when the concept of the conference center atop the site entered into open discussion.  Then in July CM Smith successfully proposed that Council should ask the administrator to prepare an RFP for a structure on the site. At the time, we suggested that the plan for a conference center underlaid the effort.  That RFP has now been released. (BIG FILE) It is remarkable for its brevity.  Most of the document is devoted either to an overview of the City of Ann Arbor (reading much as though the city is making an application, not calling for them) and technical details about the site. (The site plan still reflects the AADL planned changes.) There is little to indicate why the City would engage in a potentially costly and difficult negotiation at this time. Here are the specifications for the project in their entirety:

Site Development Objectives

A successful proposal must address all of the following site development objectives:

1. Beneficial use of the site. Any proposal for this site must demonstrate a clear benefit to the community and be consistent with the recommendations of the Downtown Plan, and A2D2 initiative. Preference will be given to proposals that incorporate a use (or uses) that provides a publicly available service to the community, for instance, building or open space that may be used for public meetings, recreation, or civic/ cultural events.

2. Environmental benefits. The development proposal should incorporate to the greatest extent possible environmentally sensitive design and energy efficiency features that follow Leadership in Energy and Environmental Design (LEED) standards. In addition,the project should propose innovative and environmentally friendly runoff water management and seek to improve water quality.

3. Financial return. The proposal must provide a positive financial return to the City. In the absence of other considerations, the City has a fiduciary responsibility to obtain fair market value upon the sale of City assets. Long-term lease or other property arrangements will be considered, but must meet this financial return criterion.

Because the Council lengthened the timeline somewhat in July, proposal deadlines call for the proposals to be submitted by November 13, with a final decision by Council in January, time for work to be coordinated with the scheduled parking structure construction.

Conclusion:The potential public benefits for this very substantial investment to the city (the parking structure) seem vague, while its importance as support for downtown development, possibly with already understood actors, seems concrete.

That pesky lawsuit: Decision time

In May, the Ann Arbor Chronicle reported that the city had received a letter from Noah Hall, Executive Director of the Great Lakes Environmental Law Center, indicating that the city was at some risk of a lawsuit over the environmental impacts of the proposed parking structure. (Hall is married to Jennifer Santi Hall, a past planning commissioner and current DDA board member.)  Little seemed to happen as a consequence of the letter, though Dave Askins, the editor of the Ann Arbor Chronicle speculated that a July decision by Council to designate the current First and William city parking lot as a target for preservation as open space might be related to the lawsuit.  The hastily drafted resolution is more of a statement of intent than a binding decision, since it leaves any actual change in the status of the lot (one of the city-owned “greenway” sites) in a misty future.  But it could be said to reduce the parking spaces available in the city, thus undercutting the principal basis for the suit (increase in vehicles and the concomitant air pollution).

But along with the letter was the news that Hall had requested copies, through the Freedom of Information Act, of council emails during the period when the structure was being considered.  This has caused considerable reverberations.  As explained in a recent Chronicle article, it has also been the basis for additional complaints in the late-arriving lawsuit.  The Great Lakes Environmental Law Center lawsuit, filed on August 11, specifically cites Open Meetings Act and FOIA violations by the city in addition to the environmental violations and nuisance charges by two additional plaintiffs.  It causes a complication because the bond counsel (Dykema) must certify the following:   “The City has no litigation pending or threatened which would have any material effect on the City’s finances or its ability to pay principal of and interest on the Bonds.”

That may be difficult to certify.  The complaint (to this non-lawyer’s eyes) seems very solid with regard to the “nuisance” and “trespass” claims from Herb David Guitar Studio and Jerusalem Garden.  They argue convincingly that their businesses and property would suffer harm from the construction period.  With regard to the environmental complaints, the complaint points to the city’s lack of adherence to its own stated policies on parking, based on the Nelson-Nygaard study commissioned by the Council, and its ignoring the pleas of the chair of the Environmental Commission (Steve Bean) for a consideration of the environmental impact before approving the project.  The OMA and FOIA complaints are also damning.

So what happens now?  Will the city still attempt to take possession of the money from sale of the bonds with the litigation pending?  If the court awards the plaintiffs an injunction that halts the project and the bond money has to be paid back, the city could suffer a penalty.  That certainly wouldn’t help our finances. Council could still act at its meeting on August 17 to halt the closing on August 19.  But is there leadership and nerve enough on council to make a last-minute decision of this nature? And will the judge (Judge Archie Brown) issue an injunction before the bond proceeds are collected on August 19? Or will the worst happen, with the city pushing ahead and then suffering the consequences – resulting in an even more dire financial situation?

I’m thinking of the plaintiffs as the guys with the white hats, riding in to save us from ourselves at the last minute.  I hope it works.

UPDATE:  The lawsuit didn’t stop the bond transaction from being finalized and plans for excavation are continuing. Meanwhile, local developers have expressed a lack of interest in responding to the RFP.  The comments on the AnnArbor.com story are interesting; they discuss the whole recent history of downtown development.

SECOND UPDATE: The lawsuit has now been settled (as of March 2010) – see the AnnArbor.com story. Construction is well underway.

THIRD UPDATE: The Ann Arbor Chronicle now has an exhaustive report on the settlement.  Was anything really accomplished?  It doesn’t look like much from here.

FOURTH UPDATE: Noah Hall of the Great Lakes Environmental Law Center has a discussion on his blog of the settlement and what they believe they have accomplished.

FIFTH UPDATE: For updated information on this subject, check the Library Lot Conference Center page, where all related articles are linked.

Categories: civic finance

Comments: 2 Comments

Legislative Legerdemain (and City Place)

August 7, 2009

Making law – i.e., legislation – is often compared to making sausage.  But Thursday’s council meeting (August 6) was more like watching a troupe of magician/jugglers.  You know, the ones who start with a single person juggling little red balls.  Another strolls up with some green balls and pretty soon they are juggling each others’ balls – until another one brings in juggling clubs.  A fourth runs in and starts juggling knives, which then get mixed in with the balls and clubs until suddenly they all clap their hands and a flock of doves flies up into the rafters.

A number of things happened at the meeting, but it was really City Place that took center stage (and all the balls).  Councilmember Anglin started the action with his motion at the last meeting to institute a moratorium on development requiring site plans in the R4C and R2A zoning districts.  It was postponed to this meeting. As CM Anglin made clear, the moratorium was intended to protect the Germantown neighborhood against the immediate threat of a City Place development, though it would apply to all such zoning districts throughout the city.  (See the Zoning Activity Map.) Body language among the other CM was not immediately negative, and CM Christopher Taylor suggested a number of amendments, clearly not anticipated by CM Anglin.  The first two appeared to strengthen the moratorium, by extending its length to a full year (from 180 days), and by restricting it to the neighborhoods around the downtown core (thus eliminating possible unforeseen problems with outlying districts not involved in the Central Area Plan issue).  Anglin accepted those as friendly.  But the next was more problematical.  It excluded PUD projects from the moratorium.   Now, this would undo the practical effect of the moratorium with regard to City Place, since last meeting’s action was to shelve the “by right”, or, as councilmembers are now referring to it, “by law” R4C-based site plan in favor of resurrecting a PUD (a public meeting is scheduled on August 12). The Germantown Neighborhood had argued in various email discussions against permitting such an exception to a moratorium, given that a PUD is proposed in regard to the underlying zoning.  But councilmembers argued to the contrary, saying that changes to R4C zoning districts that may be suggested by a study committee (appointed by council later in this same meeting) would not affect a future PUD.  Though CM Anglin argued strenuously against exempting PUDs on the basis that they can radically and negatively change a neighborhood, CM Rapundalo spoke sharply in response, stating that the council would not be doing its job if it allowed a site plan with such negative effects to pass.  CM Briere, speaking sympathetically of the frustrations of the neighborhood, nevertheless stated that the council does have the prerogative to examine PUD proposals carefully and make decisions on the basis of evidence presented.  CM Hohnke, whose history has not been in opposition to the City Place project, stated that including PUDs in the moratorium could have a downside  in weakening the general use of PUDs to provide a benefit to the community.  Finally, the Mayor pointed out that exactly the same PUD could be passed the day after the zoning was changed, so no real effect would be attained by holding a PUD till after the committee’s review. The amendment passed, with only CM Anglin voting against it.

So far, the effect was that a future City Place PUD could be entertained by the council, but a development based on the City Place site plan (postponed but with permission to the developer to bring it back at any time with 35 days notice) would be barred during the period of the moratorium.  But now CM Taylor brought a second amendment: to exclude from the moratorium all current plans for the area under review, including the Moravian PUD, the Casa Dominicks’ PUD, and the City Place R4C site plan.  CM Anglin was clearly stunned at this complete evisceration of his original motion.  CM Hohnke allowed as how this (moratorium) was not the appropriate tool to protect the area, since it did not include protection against demolition. CM Rapundalo summed up the argument for the amendment, saying that there were property rights and constitutional issues with a moratorium clearly designed to stop development.  “We have sworn to uphold the law.”  He noted that the moratorium as originally designed could send a chilling message as to whether Ann Arbor is open even to development of a “reasonable” kind.  “Stopping good development is not what we want to do.”  The amendment passed, again with all but CM Anglin voting for it.

So now – on to the main motion, which at this point would impose a moratorium on new site plans only in the near-downtown area, but exclude all the currently proposed projects and any future PUD proposals. CM Smith and CM Derezinski, who seem to be auditioning for the role of the Development Duo, both argued strenuously against even the idea of any moratorium.  CM Derezinski, noting that he had been “querulous” about the idea in the past, called the very notion “dangerous”, raising the issues of a “taking” (the concept that government strips property or its fair value or use from a citizen without due process or reimbursement), and also the issue of liability for the city, arguing that the question of a moratorium’s validity could be settled in court.  He concluded that the amendments were putting “lipstick on a pig – but it’s still a pig”.  CM Smith stated that the moratorium meant the city was “not interested in new ideas coming forward”.  CM Anglin stated that as amended, he didn’t support the thing (not his word) either.  CM Taylor argued that there were still benefits to holding future development until the R4C committee revised the zoning district.  But the motion failed, with Taylor the only yes vote.  The R4C moratorium is finally dead, with numerous wounds to its heart.  The balls appear poised to fall to the ground.

But Tuesday’s electoral results seem to have had some effect. The Council Party can evidently read a troublesome mood abroad in the land.  A new item has appeared on the council agenda. Suddenly,  a study committee for a historic district in the Germantown area is proposed by CM Hohnke and CM Higgins. Hohnke rather disingenuously stated that “we began a process some months ago” (it was, as CM Anglin rather sourly noted, on December 15, 2008, at which time Hohnke voted against a study committee) and that he wanted to support the neighborhood’s concern about historic preservation.  Discussion revealed that the district described in the resolution is extremely small and limited to parts of  South Fourth and South Fifth Avenues:

“the study area to be examined by this committee be the area encompassing properties that abut the east and west sides of South Fourth Avenue and South Fifth Avenue, bounded by the East William Historic District on the north, and Packard Street on the south, and also including 209, 215, and 219 Packard Street”

In public comment prior to the meeting, a protest was lodged that this area (which coincidentally just encompasses the City Place area, with a little margin to spare) was too small, and should extend to Madison (which would, notably, take in the Moravian PUD proposal).  However, it was noted by councilmembers that a study committee would have the authority to recommend an expansion of the district. (Final decision is up to the Council.)  Also, the strong point was that within this smaller area, demolition will be prohibited:

“City Council declares an emergency moratorium on any demolition in the proposed South Fourth and Fifth Avenues historic district, consistent with Chapter 103, Section 8:411 of Ann Arbor City Code, for six months from the date of this resolution”

As was pointed out in discussion, without this provision and even had the R4C moratorium passed in its original form, the developer of City Place could at any time have taken out a demolition permit (process time is about two weeks) and razed the historic buildings in question.

Rather ingenuously, CM Hohnke spoke to his resolution as being necessary in light of the moratorium resolution and apparently felt it necessary to defend himself against any anti-development taint from bringing it. He noted many other opportunities to increase density in the downtown, including the Library Lot, the old Y lot, the Palio lot, but now stated that south of William Street density is not required or perhaps desirable.  CM Derezinski, stating that he had not had time to look at this proposal (CM Greden said he had first seen it at 7:15, after the meeting had started; apparently he was looking at his laptop), moved to postpone till the next meeting, August 17.  But in discussion, it was apparent that demolition could occur within the two-week interval (Assistant City Attorney Kevin McDonald verified that no site permit, etc. is required to demolish buildings).  The postponement failed, with only CM Smith, CM Derezinski, CM Rapundalo and CM Greden voting for it.

Now the Development Duo tried hard to defeat this upstart resolution.  CM Smith argued that it was punitive for this one project.  She said it wasn’t fair to change rules in midstream.  If this developer is to ever build another project in the City of Ann Arbor, the next one will be less affordable, less sustainable.  CM Derezinski echoed her points, saying that it was a bad message that wreaked havoc on the predictability of the law.  Expanding her discussion, CM Smith erroneously said that Planning Commission had approved the City Place site plan (staff and several councilmembers immediately corrected her; it was defeated in Planning Commission) and that staff had “approved” it (she was again corrected; staff recommended against it).  The main argument for both was that this was using the law as a bludgeon, unfairly coercing the developer and violating due process and property rights, and also sends a message that Ann Arbor is unfriendly to developers by making the process arbitrary and unpredictable.

But CM Taylor, speaking with the authoritative voice of a practicing attorney, stated that this decision (the historic district study committee) was “in congruence with”  powers and authority of the Council; “this is within our arsenal of options” and thus was “congruent with predictability”.  On questioning, Assistant City Attorney McDonald reaffirmed that all plan review (for a PUD, for example) can proceed unimpeded during this six-month moratorium, though demolition could not occur.

Finally, Mayor Hieftje (who really should have been wearing the costume of Sarastro near the end of the Magic Flute) made a remarkable speech.  The following is a shortened paraphrase based on my inadequate speed-writing skills.

We should recognize some things and speak frankly.  This project has been before us for many months, with (a couple of ) PUD proposals refused approval by the Planning Commission and this body.  We then considered a “by-right” or “by-law” proposal that has been described by many as a plan the developer doesn’t want to build but was designed as a lever to obtain approval of the original plan…  The developer is using every available legal tool in his chest of tools to do what the city doesn’t want – what the neighborhood doesn’t want.  It’s logical that we would use the tools that are available to us.

The proposal passed, with only CM Smith and CM Derezinski voting against it.

Cue the doves.

UPDATE: As reported by the Ann Arbor Chronicle, Council amended the moratorium resolution at its August 17 meeting.  New language was added to clarify:

“RESOLVED, That the City Council declares an emergency moratorium on all construction, addition, alteration, repair, moving, excavation or demolition in the proposed South Fourth and Fifth Avenue Historic District, consistent with Chapter 103 Section 8:411 of Ann Arbor City Code for six months from August 6, 2009.”

The new language passed with CM Smith and CM Derezinski dissenting.

Categories: Neighborhoods, politics

Comments: 4 Comments